(Bloomberg) — German factory orders dropped sharply at the start of 2024 following an uptick in December – underscoring the difficulties of Europe’s largest economy to overcome its recent malaise.
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Data released Thursday showed an 11.3% decrease in demand in January from the previous month. That was worse than predicted by any economist in a Bloomberg survey. The decline was due to a slowdown in major orders, which after a strong showing in December, were back to their normal level, the statistics agency said.
A less volatile three-month reading showed a 2.3% rise from the previous period, according to Destatis.
The data come a day after strong German exports numbers at the beginning of 2024 signaled that the country’s industrial weakness may be easing. The protracted downturn in Germany’s outsized manufacturing sector is weighing on the overall economy, which may now be in a recession.
The Bundesbank has warned that output could contract in January-March period after already falling 0.3% in the final three months of 2023. But it insists that a severe downturn isn’t likely.
“The downward trend that has been observed for two years continued in January,” said Ralph Solveen, an economist at Commerzbank. “This suggests that industrial production will continue to fall in the coming months and thus contribute to the German economy shrinking again in the first quarter.”
For 2023 as a whole, Germany was the only Group of Seven country to see gross domestic product decline. GDP fell 0.3% last year amid weak global demand, high inflation, fallout from the loss of cheap Russian energy supplies and a court decision curbing budgetary spending.
That weakness is being felt in the wider euro zone, whose 20-nation economy has been flirting with a recession for more than a year.
Germany last month slashed its growth forecast for this year to just 0.2% — a much flatter rebound than the 1.3% it was predicting a few months back.
Bloomberg Economics is similarly gloomy. Earlier this week it also cut its projection for 2024 expansion to just 0.2%, saying weak global demand will probably continue to be a drag.
–With assistance from Joel Rinneby, Kristian Siedenburg and Alexander Weber.
(Updates with economist comment in sixth paragraph)
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